Ucits III spurs new San Paolo range

San Paolo Bank, the Italian financial heavyweight, is planning to enhance its product line-up for wealthy and retail clients in order to offer them a wider and more flexible choice. Plans include new fund launches and potentially increasing sales of third-party products.

The firm was a key participant in PWM’s conference on the Italian investment market in Milan in June, where the new EU directive Ucits III was high on the agenda.

The directive, which came into force in Italy in May, will facilitate the new product range currently in the laboratory of the bank’s fund management arm San Paolo IMI.

The fund supermarket Allfunds will play a key role in distributing the range. Two years ago San Paolo Bank took a 50 per cent stake in the business, which is a subsidiary of Spain’s Banco Santander.

San Paolo IMI is split into four arms: General asset management, institutional mandates, alternative investments and Luxembourg-domiciled cross-border funds. The latter consists of a range of enhanced passive funds sold to fund of funds groups, banks and insurance companies on a white-label basis.

The institutional arm services pension funds, endowments and insurance companies. The general and alternative investment arms, meanwhile, create funds to be sold through the branches of San Paolo Bank, prominent in Italy’s piazzas, as well as through rival retail and private banks in Italy and Europe.

The acquisition of Allfunds has added another distribution channel for the fund management business. The fund supermarket has been a roaring success in its home country, now controlling 50 per cent of funds. It is understood to account for ?3bn of Italian assets at present.

Alberto Castelli, commercial manager at San Paolo IMI, says that the Allfunds channel is also used to consolidate all San Paolo’s relationships with external fund managers.

These external funds will have pride of place in the new product range, scheduled for launch in September.

“The latest trend we are seeing in Italy is lots of client interest – both retail and institutional – in total return products,” says Mr Castelli.

As a result, San Paolo IMI’s chief executive Eugenio Namor is planning a range of funds aimed at performing well in absolute terms as opposed to only in relation to indices. The first two funds to be rolled out will aim to generate total returns over 18 and 20 months, respectively.

These will be followed by total return funds of funds, which will include external funds, as well as a managed account offering with an emphasis on total returns.

“We will leverage off the opening provided by Ucits III, which allows us to use derivatives for up to 100 per cent of a fund,” says Mr Castelli.

The funds will be sold through all San Paolo’s distribution channels, but particularly through the parent bank. “The selling process is very integrated into the bank. In our branches we do in-depth financial planning with the client. We make sure we understand their risk profile, we map out their liabilities and requirements, including accumulation and speculation needs, insurance and retirement needs, and then we meet these requirements with a full range of asset management, pension and insurance arrangements.” San Paolo Bank’s insurance arm, Associazione Internationale Provenza, is brought into the mix here.

Funds sold through the bank branches are divided into two packages: Gestioni Patrimoniale (private solutions) and Gestioni Multi Private (multi-solutions).

The latter allows the client access to internal funds and internal multi manager funds, which are comprised of external products. Mr Castelli says that the bank is mulling the addition of a range of direct external funds for Multi Solutions customers, which would be recommended to bank customers.

He is sanguine about the prospect of selling even more of the competition’s funds. “We want the client to have the maximum flexibility. Also, we think there are two approaches: either you allow clients to buy third-party funds directly, or you distribute third-party funds and control the process.”

Under the other package, Gestioni Patrimoniale, clients can buy in-house funds, direct external funds and even direct stocks and bonds. “It gives the clients the maximum flexibility,” says Mr Castelli.

Eugenio Namor: plans to unveil first two total return funds for San Paolo